Yield-Starved Investors Hoarding EM Bonds

By Michael Aneiro

As a sign of how income investors are clinging to anything offering a hint of yield, trade volumes for emerging-market bonds hit a three-year low in the third quarter. Trading in EM bonds fell 26% from the same period a year ago despite a 50% jump in the amount of new bonds issued this year versus last year, as Vivianne Rodrigues reports in today’s Financial Times:

The higher returns offered by emerging markets debt have lured global investors to the securities this year as they sought alternatives to lower yielding US and European debt. Year-to-date returns on the bonds stood at 17 percent yesterday, according to the JPMorgan EMBI+ Index, as spreads fell over 100 basis points since January….

“[W]hat is hurting trading volumes right now is the fact that there’s a lot of money looking for a place to invest, and not a lot of alternatives,” said Alberto Bernal, of Bulltick Capital Markets. “People don’t want to sell their bonds because there’s no guarantee they will be able to find them in the market and buy them back at a discount in the future.”